S&P revises AIG rating outlook to negative

S&P Global Ratings said June 6 that it revised its rating outlook on global multiline insurer American International Group (AIG) to negative from stable.

The move reflects S&P’s view that continued slower-than-expected progress in improving operating fundamentals could weigh on its ratings on AIG over the next 12 to 24 months.

"The outlook revision reflects AIG's protracted period of delivering P&C Commercial Insurance underwriting initiatives, which we believe may be a predictor of its executional effectiveness on a prospective basis", said S&P Global Ratings credit analyst Tracy Dolin.

“While AIG's operating performance has continued to benefit from diversification, we question management's ability to effectively execute its plan to achieve adjusted accident year loss ratio performance of 62 percent for its troubled Commercial Insurance segment by year-end 2017, raised from its original 60 percent target, given high its modest track record to date.”

AIG recorded a net loss of $3.04 billion for the fourth quarter of 2016, down from the $1.84 billion loss it made in the same period of 2015. The results were impacted by a $5.6 billion prior year adverse reserve development, driven by the US casualty operations. It was high time to increase reserves. In the fourth quarter of 2016, total commercial insurance combined ratio was 241.6 percent, up from 163.3 percent in the same period a year ago.

S&P believes that AIG's recent track record of delivering on strategic goals, specifically within its property/casualty commercial insurance segment, has been subpar and subject to revisions, while its quality of consolidated earnings have weakened over the last few years.

At the same time, S&P affirmed its ratings on AIG, including its 'A+' insurer financial strength rating, reflecting the fact that the agency continues to assess the group's business risk profile as very strong and financial risk profile as strong.

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